The Caribbean general insurance market remains profitable, albeit challenging, for participants, according to the latest special report by A.M. Best.
The report states that the region is susceptible to major storm damage, earthquakes and flooding, which can be exacerbated by economic, political and catastrophe modelling challenges.
Overall, Caribbean general insurers rated by A.M. Best have been profitable, on an operating and bottom line basis, over the past five years. These rated companies have also consistently maintained “more-than-adequate” capitalisation relative to their risk profiles.
The agency also stated that an “increasingly competitive landscape” has driven Caribbean-based general insurance companies to enhance their profiles in the marketplace, which includes developing relationships with rating agencies.
In 2000, only one Caribbean-based insurer was rated by A.M. Best compared with 17 rated general insurers at year-end 2014. Currently, rated Caribbean-based general insurers are listed along with some selected key statistics.
According to the report, several key factors have transformed the competitive landscape and influenced operating strategies.
These include industry consolidation on the back of poor economic conditions; increased regulatory scrutiny; increased and evolving accounting and reporting guidelines; globalisation of the region; and excess reinsurance capacity.
A.M. Best said: “Caribbean-based general insurers generally operate in markets with limited growth potential. Acquisitions of other insurers or existing blocks of businesses have been the main growth vehicle in recent years.”
“This has led to industry consolidation with fewer market participants.”
The remaining insurers are larger, stronger entities, and in general, are better able to withstand the impacts of natural catastrophes, unexpected losses and adverse changes in underwriting results, fluctuating investment returns or investment losses and changes in regulatory or economic conditions.
